Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

When confirmation of accounts receivable is ineffective, but other procedures are applied satisfactorily, what is the likely opinion given by the auditor?

1. Qualified opinion

2. Unmodified opinion

3. Adverse opinion

4. Disclaimer of opinion

The correct answer is: Unmodified opinion

When confirmation of accounts receivable is deemed ineffective, but the auditor has successfully applied other substantive procedures that provide sufficient appropriate audit evidence regarding the existence and valuation of accounts receivable, the auditor would issue an unmodified opinion. An unmodified opinion indicates that the financial statements present a true and fair view, in accordance with the applicable financial reporting framework. The fact that confirmation could not be effectively executed does not automatically result in an unfavorable opinion, especially if alternative procedures yield reliable results. The auditor's focus is on whether the financial statements are free from material misstatement as a whole, and satisfactory results from these other procedures can support a positive conclusion regarding the financial health and reporting of the entity. This approach highlights the flexibility auditors have in using various techniques to gather evidence, ensuring that even if one method is not effective, it does not preclude a favorable opinion if other reliable evidence substantiates the financial statements' assertions.